Carrhae Capital LLP

MIFIDPRU 8 Disclosure

December 2024

Introduction

The Financial Conduct Authority (“FCA”) in the Prudential sourcebook for MiFID Investment Firms in the FCA Handbook (“MIFIDPRU”) sets out the detailed prudential requirements that apply to Carrhae Capital LLP (“Carrhae” or the “Firm”). Chapter 8 of MIFIDPRU (“MIFIDPRU 8”) sets out public disclosure rules and guidance with which the Firm must comply, further to those prudential requirements.

Carrhae is classified under MIFIDPRU as a small and non-interconnected MIFIDPRU investment firm (“SNI MIFIDPRU Investment Firm”). As such, the Firm is required by MIFIDPRU 8 to disclose information regarding its remuneration policy and practices.

The purpose of these disclosures is to give stakeholders and market participants an insight into the Firm’s culture and to assist stakeholders in making more informed decisions about their relationship with the Firm.

This document has been prepared by Carrhae in accordance with the requirements of MIFIDPRU 8 and is verified by the Firm’s governing body (the “Executive Committee”). Unless otherwise stated, all figures are as at the Firm’s most recent March financial year-end.

Remuneration Policy and Practices

Overview

As an SNI MIFIDPRU Investment Firm, Carrhae is subject to the basic requirements of the MIFIDPRU Remuneration Code (as laid down in Chapter 19G of the Senior management arrangements, Systems and Controls sourcebook of the FCA Handbook (“SYSC”)). Carrhae, as an alternative investment fund manager, is also classified as a collective portfolio management investment firm, and as such, is also subject to the AIFM Remuneration Code (SYSC 19B). The purpose of the remuneration requirements is to:

  • Promote effective risk management in the long-term interests of the Firm and its clients;

  • Ensure appropriate alignment between risk and reward;

  • Support positive behaviours and healthy firm cultures; and

  • Discourage behaviours that can lead to misconduct and poor customer outcomes.

The objective of Carrhae’s remuneration policies and practices is to establish, implement and maintain a culture that is consistent with, and promotes, sound and effective risk management and does not encourage risk-taking which is inconsistent with the risk profile of the Firm and the services that it provides to its clients.

In addition, Carrhae recognises that remuneration is a key component in how the Firm attracts, motivates, and retains high quality staff and sustains consistently high levels of performance, productivity, and results. As such, the Firm’s remuneration philosophy is also grounded in the belief that its people are the most important asset and provide its greatest competitive advantage..

Carrhae is committed to excellence, teamwork, ethical behaviour, and the pursuit of exceptional outcomes for its clients. From a remuneration perspective, this means that performance is determined through the assessment of various factors that relate to these values, and by making considered and informed decisions that reward effort, diligence, and results.

Characteristics of the Firm’s Remuneration Policy and Practices

The Firm’s remuneration is comprised of fixed and variable remuneration. The sole component of remuneration that the Firm has categorised as fixed remuneration is base salary paid to employees. The components of remuneration described in the remainder of this paragraph are all categorised by the Firm as variable remuneration. The fixed and variable components of remuneration are appropriately balanced: the fixed component represents a sufficiently high proportion of the total remuneration to enable the operation of a fully flexible policy on variable remuneration. This allows for the possibility of paying no variable remuneration component, which the Firm may do should a need arise, such as where there is a risk that the Firm may not be able to meet its regulatory capital or liquidity requirements.

The Firm’s sole bonus arrangement is fully discretionary. The Firm has discretion to pay bonuses to all staff based on the performance of the Firm as a whole, and the contribution of the individual to the success of the Firm. Carrhae’s Members are also eligible to participate in the net income of the GP via a shadow equity scheme.

The objective of the Firm’s Remuneration Policy is to set remuneration at a level that the Firm’s staff are fairly and responsibly rewarded in a manner that is appropriately linked to their performance. The size of the bonus pool from which variable remuneration awards are made is assessed in light of the capitalisation and liquidity buffer in place at the Firm, taking into account current and future risks, drawing upon other available resources to make this assessment, such as the Firm’s Internal Capital Adequacy and Risk Assessment (“ICARA”).

The Firm has a single business unit, that of Investment Management. Members’ and employee performance is determined using financial and non-financial criteria on a meritocratic basis which is completely gender neutral. This performance assessment is based on a range of criteria on which each Member and employee, when considering their job description, should be assessed. Individuals’ performance is not solely based upon investment performance or contribution; it also includes factors such as their adherence to the Firm’s compliance policies, the FCA’s Conduct Rules, risk limits and adherence to behavioural guidelines. Violations of these policies / risk limits, if any, will be taken into account when determining variable remuneration and can have a negative impact on the amount of variable remuneration received.

Governance and Oversight

The Executive Committee is responsible for setting and overseeing the implementation of Carrhae’s remuneration policy and practices. In order to fulfil its responsibilities, the Executive Committee:-

  • Is appropriately staffed to enable it to exercise competent and independent judgment on remuneration policies and practices and the incentives created for managing risk, capital and liquidity. The Compliance Officer, is a member of the Executive Committee and so can ensure that any relevant compliance and risk considerations are taken into account when setting individual remuneration awards;

  • Prepares decisions regarding remuneration, including decisions that have implications for the risk and risk management of the Firm;

  • Ensures that the Firm’s remuneration policy and practices take into account the public interest and the long-terms interests of shareholders, investors and other stakeholders in the Firm; and

  • Ensures that the overall remuneration policy is consistent with the business strategy, objectives, values and interests of the Firm and of its clients.

Carrhae’s remuneration policy and practices are reviewed annually by the Executive Committee.

Quantitative Remuneration Disclosure

For the financial year 1 April 2023 to 31 March 2024, the total amount of remuneration awarded to all staff was £11,451,375, of which £1,530,002 comprised the fixed component of remuneration, and £9,921,373 comprised the variable component. For these purposes, ‘staff’ is defined broadly, and includes, for example, employees of the Firm itself, partners, contractors, employees of other entities in the group, employees of joint service companies, and secondees: